Navigating the Potential and the Perils of RTB for Publishers

Publishers wanting to capture a piece of the growing RTB revenue stream without cannibalizing their direct sales must commit time and resources.

I recently had the privilege of moderating a panel at the OMMA RTB, or Real-Time Buying Conference, where advertisers and publishers discussed the current state of exchanges and real-time bidding/buying (RTB). I have to admit, I was surprised at the speed of adoption of this new ad-buying platform. Panelists quoted various statistics with exchange usage more than doubling in the past year and projected to account for anywhere from 10 to 20 percent of online display revenue in 2012. What ultimately convinced me that RTB is here to stay was that over 90 percent of the advertisers that I spoke with confirmed that they're buying through these exchanges and plan to buy more.

But what about the publishers? I consistently heard from publishers that real-time bidding is both exciting and frightening. On the one hand, it can help publishers sell out their non-guaranteed inventory, but on the other hand, it exposes publishers to an even greater threat than the ad networks: the commoditization of online inventory. Additionally, publishers don't want to cede control of their inventory by throwing it into an auction.

What's a publisher to do? I found that publishers were following one of three paths:

Some publishers are staying away from it altogether based on a very genuine concern that audience-centric real-time buying fails to adequately reward premium content. These publishers hope that if enough publishers boycott RTB then it will be forced to go away. However, given the promise of higher yields on unsold inventory, there are bound to be publishers who will succumb to its services.

At the other end of the spectrum, a number of publishers have opted to swing open the door completely to RTB. The access to so many advertising dollars and promise of higher CPMs outweigh other concerns for these publishers. However, by opening their entire inventory to exchanges, these publishers risk cannibalizing direct brand sales and selling premium inventory at remnant prices.

The third and most intriguing path is somewhere in the middle. Many publishers are adopting very controlled RTB by blocking premium inventory, managing advertiser access, and gleaning market intelligence from the exchanges. However, this approach takes significant management time and commitment to be successful.

Even after listening to the expert panels and doing my own research, I still have concerns about RTB as a publisher. Is the increased yield worth the risk of premium inventory cannibalization and channel conflict? While I didn't walk away from the OMMA conference with all of my concerns resolved, I did glean a few best practices that should prove useful for any publisher deciding to dip their toe in the RTB exchange market.

Understand and utilize blocking tools.

Leverage information/data to improve "in-house" sales.

Take advantage of pricing floors for risk-free testing.

Explore creating a private exchange.

1. Optimize blocking tools. As I previously mentioned, one of the biggest concerns for publishers is protecting premium inventory and avoiding channel conflict with their in-house sales team. This requires more than a one-time data dump of existing advertisers into the exchange's blocking system. Publishers must understand the full monitoring and blocking capabilities of their exchange and use them to dynamically update blocked brands, advertisers, and even referring URLs in collaboration with the direct sales team. A publisher must also understand the controls that restrict rich media, high-impact units, and premium placements from the exchanges. Publishers may find that allowing certain rich media units greatly increases their RTB-driven CPMs without impacting direct sales; however, failing to routinely monitor and revaluate these blocking settings may let the latest "in-banner take-over unit" cannibalize direct custom campaigns.

2. Leverage RTB's "bid landscape report" to drive direct sales. As it turns out, RTBs and exchanges provide a host of valuable information that can significantly improve direct sales efforts. For example, new advertiser leads can be created by identifying new advertisers bidding on your inventory. Similarly, direct sales teams can identify opportunities to raise CPMs based on what advertisers are willing to bid on the exchange. To properly leverage all of the information available, the direct sales team must collaborate with the performance team managing the RTB relationship. Unfortunately, too many publishers silo their performance and direct sales teams with little or no information sharing between the two. One potential solution practiced by one of the publishers on my panel is to set a team goal for total revenue that would combine RTB and direct sales.

3. Create price floors that test the waters before selling your inventory. RTB platforms allow publishers to create pricing floors on their inventory. This a good yield management practice in general and helps prevent commoditization. However, pricing floor controls can serve another strategic purpose. Just as would-be investors sometimes set up mock portfolios of stocks to test the waters before plunging in with real cash, so too can publishers test the waters before selling actual inventory through RTB. You can do this by setting pricing floors on your inventory that are significantly higher than your direct sales team's rate card. Few, if any, sales will transact at the high price points, but you'll be able to see what advertisers are bidding at what price on your inventory. Publishers new to RTB can use this tactic to develop their inventory offering and blocking strategy and experienced publishers can leverage this technique before opening up new inventory or ad units.

4. Explore private exchanges. Several larger publishers told me that they're currently participating in open exchanges to gain the expertise to create their own private exchange. This allows for complete control of inventory and could even enable direct sellers to sell through a private platform. An example of this is a direct seller offering a large custom sponsorship to an advertiser that includes run-of-site (ROS) media. As part of the deal, the advertiser is able to purchase the ROS media on the private exchange either at market price or at a set price. This provides advertisers the efficiency they seek, while eliminating the channel conflict for the publisher. While this option is only viable to publishers with enough inventory to attract demand, the technology is reasonably easy given that the leading RTB platforms, including Rubicon's REVV platform and Google's Ad Exchange, offer this solution.

In summary, publishers wanting to capture a piece of the growing RTB revenue stream without cannibalizing their direct sales should commit the time and resources upfront that will be required to make sure the exchanges become a seller's and not a buyer's marketplace.

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ABOUT THE AUTHOR

Mike Dodge serves as chief executive of Evolve Media's publishing unit, AtomicOnline, with a portfolio of over 120 owned and operated and affiliated websites. These websites roll up under four branded demographic hubs: CraveOnline.com, SheKnows.com, GameRevolution.com, and theFashionSpot.com reaching over 40 million men, women, and teens each month. Dodge oversees a team of 100 employees and 280 contractors and freelancers responsible for editorial, operations, business development, marketing, sales, and product development.

He was formerly general manager for the Home and Real Estate Division of Internet Brands, Inc. where he oversaw the division's expansion from three to 12 major web properties and tripled revenue to over $20 million. He also served as CMO for Zensys, a Cisco and Intel-backed wireless technology company, and held management positions with McKinsey & Co. and Proctor & Gamble. He holds a BA in political science from the University of Chicago and an MBA from Harvard Business School.

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